Bitcoin Faces Potential Upheaval as U.S. Spot ETF Approval Looms
Summary:
Bitcoin could face turbulence as the first spot exchange-traded fund (ETF) is approved in the U.S., predicts Joshua Lim of Genesis Trading. Institutional investors from traditional finance sectors, who have been investing in Bitcoin ahead of this approval, could exit, potentially leaving retail investors at a disadvantage. This trend could echo the price trajectory of the Gold ETF after its launch in 2004. Despite recent news, including the hefty settlement between Binance and the U.S. government, institutional interest remains high, with Bitcoin futures trading at a premium.
Potential troubles for Bitcoin may arise with the first sanctioning of a spot exchange-traded fund (ETF) in the United States, according to the latest alert. Joshua Lim, who oversees derivatives at Genesis Trading, a finance sector company, forecast a turbulence-ridden kick-off to 2024 for Bitcoin's pricing in a chain of messages on X, previously known as Twitter, posted on November 28.
Bitcoin, it seems, has become a favorite bet for mainstream financial institutions, or "TradFi", hoping to profit handsomely from the approval of the spot ETF, Lim elaborated. He pointed out that "TradFi" professionals have been investing heavily in crypto in anticipation of ETF news, accruing their positions over the last several months, and presently paying a significant premium to support it. This information was presented in correlation with data detailing the open interest on Bitcoin futures offered by CME Group.
Visible cues to this trend can be seen in the performance of the premiere Bitcoin futures ETF (BITO) and shares of crypto-centric firms such as U.S. exchange Coinbase (COIN). The latter has seen a remarkable 250% surge since the year's beginning. While this has sparked excitement and reinforced the narrative of Bitcoin welcoming institutional adoption, this euphoria could quickly evaporate when the spot ETF finally gets approved. Lim and others indicate this could be a typical scenario of purchasing on speculation and selling once the news breaks.
Lim went on to ask: "What are the implications of this?" He suggests that traditional finance is already heavily invested and possibly deliberating on when to pull out of this trade around the time of the ETF announcement, predicting that ordinary investors might be drawn in, while "TradFi" professionals exit.
His predictions are echoed by others, suggesting the day the ETF gains approval might ultimately disadvantage small-scale investors.
James Straten, a research analyst at CryptoSlate, a firm offering insights on crypto, referred to historical precedents to back these worries. He explained that the Gold ETF saw a decline in price after its launch in November 2004, from around $45 to nearly $41 by May 2005. However, it saw an extraordinary 268% upward shift over the following seven years, as outlined in his analysis published on CryptoSlate on November 28.
On the other hand, noted trader, Jelle, emphasized the enduring interest of institutional investors, despite the week's news developments. These include the $4.3 billion settlement between the U.S. government and Binance, the world's biggest cryptocurrency exchange. The point he tried to drive home was that the CME futures continue to trade at a premium over the Bitcoin spot price.
Please note, this news piece does not offer investment advice or recommendations. Investment and trading activities carry inherent risk, so we urge readers to undertake their independent research before making decisions.
Published At
11/28/2023 3:06:05 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.